Social Security Act Creates Federal Retirement and Unemployment Insurance System Over Business Opposition

President Franklin D. Roosevelt signs the Social Security Act on August 14, 1935, establishing the first comprehensive federal system for old-age pensions, unemployment insurance, and aid to dependent children and the disabled, creating the foundation of the American social safety net. Labor Secretary Frances Perkins, the first woman to serve in a cabinet position and the driving force behind the legislation, considers Social Security the crowning achievement of the New Deal, establishing the principle that the federal government bears responsibility for citizen economic security.

The act passes despite fierce opposition from the American Liberty League, National Association of Manufacturers, and U.S. Chamber of Commerce, which denounce the program as “socialism” and predict economic catastrophe. Business groups particularly object to the payroll tax funding mechanism and the precedent of federal social insurance. Republican critics including Congressman Daniel Reed and Senator Daniel Hastings call the program “the lash of the dictator” and warn it will “end the progress of a great country.” The American Liberty League funds legal challenges and propaganda campaigns against Social Security, while NAM distributes pamphlets arguing the program will “mark the end of democracy.”

Despite these attacks, the Social Security Act passes with substantial bipartisan margins (77-6 in the Senate, 372-33 in the House), reflecting the overwhelming public demand for economic security during the Great Depression. The original act excludes agricultural workers and domestic servants—occupations employing the majority of Black workers—a compromise with Southern Democrats necessary for passage. This racial exclusion, later partially remedied through amendments, demonstrates how progressive reforms can incorporate discriminatory carve-outs to overcome political opposition. The Supreme Court upholds Social Security’s constitutionality in Helvering v. Davis (1937), following the “switch in time” shift in judicial attitude toward New Deal programs. Social Security expands through subsequent amendments to cover additional workers and benefits (1950, 1954, 1956, 1965), becoming the most successful anti-poverty program in American history while remaining a target for privatization schemes by corporate interests seeking to capture its $2.9 trillion trust fund.